A Market With No Memory or Conviction

It's not rigged, it only seems that way. I am talking about that now-ridiculous 150-point decline in the last hour on Monday off of worries about Italy, or the big swoon last week over the month-old Fed minutes.

Neither seems to make much sense to me now. The Fed minutes were simply moldy with age, and when we heard from the Fed chief today, it was very clear that nothing had changed whatsoever about his plans to keep buying bonds as necessary. All that sturm und drang and point-loss for nothing.

How about the last hour on Monday? Sure, there had to be worries about what Bernanke would say. And there had to be concern and angst about whether Home Depot (HD) could do better than Lowe's (LOW). But let's face it, people figured, "I better sell now, because Italy will be down big tomorrow, and we will open low and get killed."

Did that happen?

Well, the first part sure did. Italy was down almost 5%. But the second part? We went up 90, got hit and then soared past that. The whole worry turned out to be chimerical.

After a while, we have to say to ourselves, what gives here? What are people doing? What's the point of selling down 150 in the last hour?

Again, with mixed signals you can look at the data all sorts of ways. You can say, "Well, with Italy on top of sequestration and blah blah blah, we should be down."

But the sudden swings and lurches simply aren't in synch with the data in any way whatsoever.

Unfortunately, we are in a new pattern here. We are now in a world again where there is no conviction and everything is a one-off or there is no memory, as Doug Kass said earlier today. The only stocks that seem immune to it are Clorox (CLX), Hershey (HSY), Colgate-Palmolive (CL) and maybe Procter & Gamble (PG).

All that said, though, if the market has no memory, you have to have one for yourself. Yesterday, for example, we caught a prescient upgrade for Cummins (CMI). The stock opened up a couple and then proceeded to give up the ghost into the futures-driven selloff.

Today, the stock rallied back to where it was before the selloff, because nothing had changed.

You simply had to remember what the market forgot. I think that going forward, it is going to be like that market. You need to remember the cards while the market keeps shuffling the deck.